Most retailers offer the ability for customers to return a product previously purchased from that retailer. When the customer returns the product, the retailer generally applies a refund to the customer's payment instrument, such as a credit card or a debit card, for the amount of funds used to purchase that product. Sometimes, during the refund/return exchange, the customer's payment instrument to receive the refund amount is no longer valid. For instance, the customer's credit card may have expired, or the bank account associated with the debit card may have been closed. In that instance, retailers at a point of sale (POS) must apply the funds to a physical gift card. This requires an additional step at the POS to activate and load the physical gift card with the funds for the refund/return. Further, the customer now has to remember to both bring the physical gift card with them to use the physical gift card for a next purchase.
Thus, a need exists for a system for automatically processing refunds to an electronic gift card, and more specifically to embodiments of a method and system for processing payment refunds in the event an original payment instrument is invalid at a time of a refund.